Overview:
On Tuesday, October 1, 2024, the U.S. stock market ended lower, with heightened geopolitical tensions weighing on investor sentiment. Iran fired ballistic missiles at Israel in retaliation for Israel’s military campaign against Hezbollah, prompting U.S. President Joe Biden to order U.S. military assistance for Israel. This escalation led investors to pull back from riskier assets, while defense and energy stocks benefited from the uncertainty.
The Dow Jones Industrial Average fell 0.41%, dropping 173.18 points to close at 42,156.97. The S&P 500 declined 0.93% to 5,708.75, and the Nasdaq Composite lost 1.53%, closing at 17,910.36. While the broader market dropped, defense stocks rallied, with Lockheed Martin and Northrop Grumman gaining as tensions in the Middle East increased.
Oil prices surged following the news, with U.S. crude futures rising 2.4%, pushing energy stocks higher. Meanwhile, airline stocks like Delta Air Lines fell, as rising oil prices added to cost pressures. Investors are also cautious ahead of the U.S. jobless claims and monthly payroll reports expected later this week, which will provide further insights into the state of the labor market.
Fear & Greed Index:
Fear – Investor sentiment turned cautious as geopolitical risks increased, leading to a shift toward safer assets like defense stocks and energy, while broader market indexes weakened.
Key Indices (Closed Prices):
- Dow Jones Industrial Average: -0.41% at 42,156.97
- S&P 500: -0.93% at 5,708.75
- Nasdaq Composite: -1.53% at 17,910.36
Sector Performance:
- Winners:
- Defense: The defense sector rallied, led by Lockheed Martin (+3.6%) and Northrop Grumman (+3%), as investors flocked to companies expected to benefit from increased defense spending.
- Energy: Rising oil prices fueled gains in energy stocks, with ExxonMobil gaining 2.3% as oil futures surged 2.4%.
- Losers:
- Technology: The tech sector, particularly high-growth stocks, suffered losses, with the Nasdaq falling more than 1.5% as investors moved out of riskier assets.
- Airlines: Airline stocks dropped as higher oil prices are expected to increase operational costs. Delta Air Lines fell 1.6%.
Key Movers:
- Lockheed Martin (LMT): Gained 3.6% as defense stocks rose following the missile strike by Iran on Israel.
- Northrop Grumman (NOC): Climbed 3% as tensions in the Middle East boosted defense-related companies.
- ExxonMobil (XOM): Rose 2.3% due to a surge in oil prices following geopolitical concerns in the Middle East.
- Delta Air Lines (DAL): Declined 1.6% as rising oil prices increased concerns over higher fuel costs.
Economic Data:
- Job Openings: Data released on Tuesday showed that U.S. job openings rebounded in August, a sign that the labor market remains strong despite ongoing economic uncertainty.
- ISM Manufacturing: The Institute for Supply Management (ISM) reported that U.S. manufacturing activity remained weak in September, with the index at 47.2, just below estimates of 47.5.
- Geopolitical Concerns: The market was rattled by geopolitical tensions following Iran’s missile launch at Israel, increasing investor uncertainty and pushing up volatility. Wall Street’s fear gauge (the VIX Index) rose, reflecting investor concerns about future risks.
Outlook:
Geopolitical risks are expected to continue influencing market sentiment in the near term, particularly with escalating tensions in the Middle East. Investors are also awaiting key economic reports, including jobless claims and monthly payroll data, which could further shape the Federal Reserve’s interest rate decisions. Defensive sectors, such as energy and defense, are likely to see continued strength if geopolitical concerns persist, while growth sectors, including technology, may remain under pressure as investors shift to safer assets.
